Daily Digest: CEO perspectives on GFL deal, Covanta UK project in court
Plus, repeal efforts move forward for franchising in Minnesota, a pipeline explosion stalls Waste Management collections in Washington and more in our daily roundup.
In the Daily Digest, the Waste Dive team rounds up insights and moments you may have missed.
THE NEW INDUSTRY ORDER
Yesterday's announcement of GFL Environmental's acquisition of Waste Industries has quickly become the most talked about deal of the year so far and sparked plenty of speculation about the new industry power structure. Some speculated whether this might even make GFL the fourth-largest industry company in the U.S., if not North America. While details are still being worked out (and regulatory approval is of course pending) sources indicate it's safe to say this will firmly cement GFL in the number five slot.
How this will play out heading into 2019, and whether it will trigger further deals, remains to be seen. In the meantime, two new articles in the companies' hometown papers offer further insight.
In an interview with Canada's Globe and Mail (paywall), GFL CEO Patrick Dovigi said he's been trying to do a deal with Waste Industries "for the last couple of years." According to Dovigi, this was ultimately financed by $1.3 billion in equity and the rest in debt.
S&P has estimated GFL's adjusted EBITDA will now range between $650-750 million, and about half of all sales will come from the U.S. While the ratings agency is said to be supportive, it also noted GFL risks a rating downgrade if it adds much more debt. The article describes this factor as the main reason GFL didn't end up pursuing its IPO plans earlier this year in the aftermath of Moody’s Investors Service switching its rating of the company's bonds to negative. That downgrade prompted the April recapitalization deal with new private equity backers, which Dovigi said have a much longer term view.
"We’re building a business that’s going to be here for the next 50 years," he told the Globe and Mail.
In his own interview with The News & Observer, Waste Industries CEO Ven Poole described the transaction as ideal because the two companies don't overlap in any territory and no layoffs are expected. The Poole family, which took back a majority stake in their own business last year, will become GFL shareholders and also see existing Waste Industries debts paid off.
"It’ll be business as usual," Poole told the North Carolina newspaper. "Owning a small piece of a bigger pie is a just logical progression for our family from an investment standpoint, as opposed to selling out and taking the money."
IN OTHER NEWS
San Diego keeping franchise system non-exclusive, but adding many new conditions — Waste Dive
Repeal of organized collection ordinance could be up for vote next week — St. Paul Pioneer Press & MPR News
Opponents of St. Paul, Minnesota's new franchise system, which took effect on Oct. 1, have collected enough verifiable signatures to initiate a ballot question to repeal it. Though the St. Paul City Council appears likely to preempt the need for a ballot question and consider repealing the relevant ordinance itself next week. City staff maintain the program could continue operating because the language being challenged only involves the licensing structure. However, a separate petition is still circulating that targets the contract and pricing structure, which could potentially have broader consequences if successful.
More promising signs for domestic plastics recycling with new investment and demand commitments
- The Closed Loop Fund recently announced a $1.5 million investment in California company rPlanet Earth. Described as "the world’s first completely vertically integrated manufacturer of post-consumer recycled PET (rPET) and multiple high rPET content packaging products under a single roof," the facility makes various types of food grade packaging. Due to its potential for sourcing local material, rPlanet has also received a $3 million grant and $4 million in loans from CalRecycle.
- The Association of Plastic Recyclers' Demand Champions program has reportedly led member companies to increase their use of post consumer resin (PCR) by 6.8 million pounds in the past year. The goal is to increase PCR usage for pallets and "work in process" products for manufacturing settings. The program will have 12 members, including many high-profile global brands, in its second year.
A pipeline explosion in Canada's British Columbia has limited the supply of natural gas for Puget Sound Energy by about 15%. Waste Management's fleet in King and Snohomish counties is stranded as a result. The company announced it would not be servicing multiple municipalities in the area, including Seattle, for at least one day. Industry fleets have been gradually shifting toward natural gas vehicles in recent years, especially on the West Coast, but this is a reminder that fuel supply may be vulnerable to such incidents depending on its source.
Covanta U.K. project gets its day in court — Bedford Today
A case over the U.K. Environment Agency's approval of Covanta's Rookery WTE project is set to be heard in the High Court of Justice today. While Covanta isn't a directly named party in the case, a loss for the government agency could set back the project's timeline. When asked about this during the company's Q2 earnings call in April, CEO Stephen Jones said, "We don't think the claim has any merit. And I think it will fail. And so in the meantime, we'll be continuing to develop the project." The joint project with Veolia is set to have annual capacity for up to 585,000 metrics tons of waste.
SEEN & HEARD
I’ve been in Houston this week for a very fruitful US Conference of Mayors Municipal Waste Mgmt Association conference (stay tuned for coverage) and the trip wouldn’t be complete without a stop here. Stay tuned for that story too! pic.twitter.com/JigurPx1H6— Cole Rosengren (@ColeRosengren) October 10, 2018
- Webinar: Solutions for Waste Facility Leachate Reduction (2-3 p.m. ET) Waste Today and Owens Corning are teaming up for a session on regulatory requirements about leachate collection and treatment, with a focus on geosynthetic solutions.
Do you have events or webinars that should be on our agenda this week? Email [email protected].
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